Mexico Infrastructure Finance maintained that an $18 million guarantee issued by the Corporation of Hamilton for a hotel project was valid, during a Supreme Court hearing.

The municipality claimed during a hearing on Monday that it was not empowered to issue the guarantee for the Par-la-Ville hotel project because it was not for “municipal purposes”.

However, addressing the court yesterday, Lord David Pannick, QC, representing MIF, said the project was intended to benefit the city and its residents, and as a result the guarantee had a municipal purpose. “The guarantee in this case was an essential part of the scheme,” he said.

The dispute revolves around a guarantee issued by the corporation to Par-la-Ville Hotel and Residences Ltd, a developer who intended to erect a luxury hotel on the present site of the Par-la-Ville car park, to help them secure a bridging loan.

While the developer subsequently received the loan from MIF, it soon defaulted and the funds have not been recovered, leaving the Corporation of Hamilton on the hook.

The courts later approved a consent order from the corporation, but the municipality has applied to have the order set aside on the grounds that the guarantee itself was “ultra vires” — beyond the power of the corporation to issue.

Barrister Michael Beloff, QC, representing the corporation, further argued that amendments intended to allow the guarantee had been ineffective as they had not touched on the requirement of municipal purposes.

Making submissions yesterday, Lord Pannick, however, noted that the amendments had included a reference to guarantees in a section of the Municipalities Act which would allow the body to act with legislative approval for “specific purposes”.

“The legislation expressly recognises that the corporation may, with legislative approval, give a guarantee for specific purposes,” he said. “At the very least, it recognises that the power exists, otherwise it would not state the corporation is entitled to guarantee for specific purposes. The section of the legislature after amendment is that broad powers are enjoyed if the minister approves or if legislative approval is conferred.”

He also argued that the court should, where possible, interpret the legislation in a manner which would not frustrate the intentions of legislators. In this case, he said the amendments were meant to remove the perceived barrier preventing the corporation to issue the guarantee. “It is well established that, as far as it is possible, the court will seek to advance the purposes of the legislature, to arrive at a conclusion that secure the legislature’s intentions,” he said.

While Mr Beloff had noted the terms of the guarantee itself had stated it was intended for “private and commercial purposes”, Lord Pannick maintained that it was undisputed that the corporation sought to move forward with the project to benefit the municipality.

“There is no dispute that the corporation entered into this guarantee because it believed it was for the benefit of the local area and its inhabitants,” he said.

“There is no suggestion whatsoever in any of the evidence that there was a private purpose. They were not doing this to make some private financial gain.”

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